Good morning, and welcome to the Nabors Second Quarter 2016 Earnings Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Denny Smith. Please go ahead.

Good morning, everyone. And thank you for joining Nabors' earnings teleconference to review our second quarter results. Today we will follow our customary format, with Tony Petrello, our Chairman, President and Chief Executive Officer, and William Restrepo, our Chief Financial Officer, providing perspectives on the results, along with insights into our markets and how we expect Nabors to perform in these markets. In support of these remarks, we have posted some slides to our website which you can access to follow along with the presentation if you desire. They are accessible in two ways. One, if you're participating by webcast, they are available as a download within the webcast. Alternatively, you can download the slides from the Investor Relations section of nabors.com under the Events Calendar submenu, where you will find them listed as Supporting Materials under the conference call listing. Instructions for the replay are posted on the website. With us today in addition to Tony, William and myself are Chris Papouras, our President of Nabors Drilling Solutions; John Sanchez, our Chief Operating Officer for Canrig; and Laura Doerre, our General Counsel, and some of our other members of our senior management team. Since much of our commentary today will concern our expectations of the future, they may constitute forward-looking statements within the meaning of the Securities and Exchange Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks and uncertainties as disclosed by Nabors from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, our actual results may differ materially from those indicated or implied by such forward-looking statements. Also during the call, we may discuss certain non-GAAP financial measures such as adjusted operating income, EBITDA, adjusted EBITDA, operating income loss…

Thank you, Tony, and thanks, everybody, for joining us today. Second quarter net income from continuing operations attributable to Nabors was a loss of $183.7 million, or $0.65 per share. Excluding impairments and losses related to disposed businesses and assets, net income from continuing operations was a $72.1 million loss, or $0.26 per share. The comparable loss for the first quarter was $80.1 million, or $0.29 per share. Excluded from the above second quarter losses were charges of $95.8 million after-tax, or $0.34 per share, for a portion of C&J's earnings as well as impairments and costs related to our remaining investment in that company. Also excluded were $15.8 million after-tax, or $0.05 per share, related to the impairment in the value of certain assets we have agreed to sell as well as the write-down of a receivable from a previously sold business. Revenue from operations for the second quarter of $571.6 million decreased by $26 million, or 4% sequentially. While our international business was relatively stable, our drilling activity eroded further in North America and our Rig Services business declined even more. U.S. drilling fell by 5.6% to $140.3 million, driven by a 10-rig drop in the Lower 48 and the seasonal reduction in Alaska. These decreases were offset by the resolution of negotiations on the contract for a MODS 400 rig in the Gulf of Mexico, which resulted in recognition of additional revenue totaling $40.9 million. In addition, early-termination revenue accounted for $4.2 million, roughly in line with the prior quarter. International revenue was flat at $401 million despite a nine-rig reduction during the quarter. The second quarter benefited from early-termination revenue of $10 million in Kazakhstan and $9 million in non-recurring revenue from the conclusion of standby revenue negotiations in Angola. Rig Services suffered more than our…

The first question is from Angie Sedita at UBS.

Good morning, guys. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Good morning.

Good morning.

Well, congratulations on the term contract for the M800 in this market, so it's certainly impressive. So maybe you can give us a little color there on the length of term for that contract and anything that you're willing to say on rate. Is it closer to leading edge or modestly better? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Well, in terms of term, it's in the one-year to two-year category on term, and rate, yes, it's above what you understand as spot, upper teens, plus additional services. So that's the concept.

Okay, okay. And that's three services on that rig or more? Anthony G. Petrello - Chairman, President & Chief Executive Officer: There is going to be a bunch of services on the rig, yeah.

Okay. And then when you think about your entire fleet, right, clearly the rig of choice here is the 1,500 horsepower, 7,500 psi circulating systems and the 750,000 pounds of mass. I know that's in your M800 fleet. Can you talk about your rest of your fleet, how many other rigs have those capabilities and how many could be upgraded to that capability? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Okay. So the X rig that we announced, Angie, as you know two years ago was all designed with the prospect that we saw the market moving to optimized pad drilling. So the entire technology of the X platform rig was key to this structure. So for example the X rig was designed with three platforms – with three mud pumps in its base case constructive with all the high-pressured pumping – piping already done. When we start rolling it out, at the beginning the operators didn't want to have the third mud pump, so we didn't put third mud pump into all of them but it's already configured for the third mud pump. The other interesting point is the racking capacity on the X rig is also 25,000 full racking capacity, which also goes to pad optimizing. The next point is when you think about pad-optimized, as people start getting experience with these pumps, they're also going to realize you may need a fourth engine, and we've actually had some operators come to us about a fourth engine. The difficulty for the existing rigs out there in the marketplace, conventional 8T (31:09) rigs, is their engine housings are all designed for three engine houses. We specifically designed the fourth – the X rig with more than that because we had international experience where we've tried to be, as I said earlier, we intend the original design make it as ubiquitous as possible. So the X rig is actually wired to handle four engines. So our expectation is as the market matures and the customers understand that they need the stuff, we're going to drop those additional components in and by March next year we'll have probably over 90 rigs that I think are unparalleled. They'll have 7,500 pumps – 7,500 horsepower liners, I'm saying, that the three pumps and the fourth engines.

Okay. Okay. Very, very helpful. And then maybe one quick final one on the international market, are you seeing any – you mentioned, number one, that you think that we'll see some increasing spending in Latin America next year, and maybe you could talk a little bit about that. And then second is thoughts on price concession recovery in the Middle East and the potential timing of that? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Sure. Well, as you know from the last conference call we expressed some concern about what was going on in the Middle East with pricing and we also, to be conservative, we also signaled maybe there's some additional (32:31) risk in Saudi in particular. And as you can see from the announcement, those rigs didn't come down and we're working hard at keeping those rigs busy in the marketplace. Generally I think the biggest activities in terms of location would be Middle East and Asia. That ranges from the countries such as Kuwait, obviously, everyone knows about Kuwait. The Kuwait tenders have been – it's like the longest berth out there. It's been going on for 18 months and we are still waiting for the tender but it's a very sizeable tender that everybody in the industry knows about. Algeria, there's incremental rigs; India, Kurdistan, Oman, UAE and maybe Russia. So all those markets we see some activity at least in terms of tendering and discussions right now for next year. In Latin America I think Mexico – I think one of the reasons why our numbers are – we're seeing some decline in the third quarter and fourth quarter is Mexico is actually maybe going to zero rigs right now. But we think there is some discussions going on that signal maybe that's going to about to turn like the first quarter of next year as well. So that's the way I see it right now.

Okay. Great. Thanks. I'll turn it over.

The next question is from Blake Hancock at Howard Weil.

Thanks. Good morning, guys. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Good morning.

Tony, maybe back on the three new M800s, the one that's contracted and the two more that it sounds like you are looking to sign. Can you maybe talk about are those rigs maybe replacing some of your own or are they taking market share? Just trying to understand what the dynamics are there. And then are those also with new customers or just what dynamic's driving the new build or is this maybe a legacy AC rig since we have plenty of those stacked in the market today? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Right. Well, first of all, those rigs are not replacing our own, they are actually expanding our market and our footprint. The X rig, as we said before, was designed for pad optimal – as a pad-optimal rig and the consequence that when we signed the X rig we thought that the market was going to go to multi-well pads, pads consisting of more than four wells per pad, as we thought that's the way the operator would find the economics most attractive. That's what was built. It was not built as a fast-moving 1,500 horsepower rig. The M800 builds on that and now the M800 has most of the features the X rig has; it also can be a fast-moving rig. So for wells with – for pads with less than four wells or six wells on a pad, the M800 is the rig of choice. I think it has a lot of advantages compared to all the other existing AC rigs in the sense that it has more racking capacity, it has the three pumps, it has the four engines, it has a (35:23) and actually it can move in – we're targeting two days for that rig. So we think that the M800 is actually going to expand the marketplace for us, not have a (35:32). And the idea is to get it to customers, particularly in areas where it's been the bastion of our – some of our other players in the market, in the industry, that's the whole thinking.

That's great. I appreciate it. And then internationally, like you said the rigs didn't come off in 2Q like we had expected and you mentioned maybe a modest decline here in 3Q with 4Q looking it sounds like a bit worse. Can you maybe just talk about what's taking place here, where are the rigs coming out of and help us understand the margin progression at least over the back half of this year? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Right. So I think, as you look into the next quarter, the amount of decline in rigs, and we are looking at most a couple rigs, and I think we signaled that in terms of mix the rig is working a drop in rates from our average this quarter maybe another 4% or 5%. So the total – that would indicate what the total would be. I think there is also – we also signaled in the comments that we are really being very aggressive about figuring out where are all the money is put on the table and trying to collect some. So we also expect and have some offset build declines. So when you put it all together in the third quarter we think the sort of EBITDA internationally is a risk of about say 3% to 4% just to give you some rig sensing here. And the fourth quarter maybe another 5% kind of risk. And the declines – there is no single area where there's a lot of declines. It's a bunch of miscellaneous stuff. It's everything from – as I said the largest one I think is Mexico. And Mexico totally goes off down to zero effect. There is Angola will go off, Kurdistan has something, Iraq has something. I mean…

That's great. Thanks, guys. I'll turn it back.

The next question is from Sean Meakim at JPMorgan.

Hey, good morning. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Good morning.

So I think I heard you right that you're expecting contracted rigs to be up sequentially in the third quarter, so perhaps that M800 helps a little bit, but I think that implies that you're adding contracts. If that's the case, could you give us a little more detail what those could look like, maybe term lengths, rates, any of them are bids versus being negotiated? Just trying to get a sense of the mix of some of that activity that you're adding the third quarter. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Right. Right now I would say the bulk of it is very short term, and you just get rigs back into the marketplace and customers normally start thinking of ramping up. And as we sit here now, as mentioned in our comments, we think we'll exit the quarter an average of 50 rigs, and hopefully the exit rate will be modestly above the rate we are seeing which is at 46 rigs – 49 rigs working. So yeah, that's the strategy right now. We're not really going long on stuff other than some of the new-builds that we talked about. And we're just – we're more on the shorter end of the curve right now.

Okay. That's helpful. And then just maybe circle back to the contracts that you announced today, and you talked about this is where we want to be allocating capital. Can you give us maybe a sense of, we talked a bit perhaps a little bit internationally, but just where do the other kind of opportunity sets that are out there, and is there kind of a return hurdle rate or some of the different ways in which you're trying to rank order some of your deployment of capital into some of these opportunities? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Right. Well, the first thing is with respect to the three ones that we announced today, the payback is less than four years on those projects. And some of them actually pay back substantially better than that, so that's point one. And that kind of hurdle rate we've consistently used at Nabors and we try to look for opportunities where that makes sense. I think the other point though is in the U.S., where we are building rigs right now in a market that obviously the pricing does not lag into term contracts and cover those contracts. Our thinking there is that there is a technology shift going on and we want to be at the table with that. We think we have some better mousetraps in process right now. And we want to get them in front of the customer and build that position. And the other point I'd like to make is, all this technology we're talking about, this has been part of a two-year campaign in terms of building a platform. And so one of the things that we're thinking when we do this is that a lot of the features, especially operating systems…

(43:21) Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah. And that includes our directional drilling as well as ordinary performance tools on the rigs. So we have had operators calling around saying how the hell we did it. But that's the concept here.

Thank you very much for that detail. I guess to wrap up that point, one thing that would be helpful is if you could just remind us going from say just a rig day rate to adding in all the potential services, what does that delta look like on a day rate basis? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Well, on the – without wellbore placement, it's a couple thousand. With wellbore placement, it could be anywhere from $8,000 to $10,000 more.

Wow, okay. Great. Thank you for all that. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah.

The next question is from Jim Wicklund at Credit Suisse. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Good morning, guys. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Good morning. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): There is no question that the packaging or bundling of services, as you note is a coming trend and is very beneficial. If I could though, just what is the current leading edge – now that we actually I guess have a spot market – what is the spot market for a PACE-X or equivalent rig in the market today? Anthony G. Petrello - Chairman, President & Chief Executive Officer: I would say mid to upper teens. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Upper teens? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Mid to upper teens. Mid to upper teens. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Mid to upper teens. Okay, okay. Because we had heard, I guess Pioneer had talked about getting rigs at $14,000 a day in the Permian, and so we were just trying to triangulate that. I appreciate it. And Tony, I was...

That's per month. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Not much. It was per month. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Okay. I was a bit surprised to see Nabors and Riverstone vie for the C&J business in the courts, after the sale of your C&P business was the crowning achievement of your strategic plan. Can you talk about the rationale for what you're doing there? Anthony G. Petrello - Chairman, President & Chief Executive Officer: I can't talk much about it other than to say, like I said, I think at this point the company has filed for bankruptcy, and the lenders have a pretty large number of lenders behind the restructuring plan. I think our thinking has always been that if there is an opportunity that we could deploy capital and maximize the investment we had in C&J with our superior return for ourselves, if there's that path to do that, we would pursue it. And obviously, if we're doing it with a partner like Riverstone who has got, I would say, has become the premier energy company in this space right now on private equity, that we would only do it to make money and – so that's the only thing I can comment on right now. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): And clearly it seems that most people in the market think that completions at least early will do better than land drilling early. You make the point of how much more efficient we've made the rigs, and unfortunately you guys don't capture all the value created in day rate. Do you agree with that attitude, and is pressure pumping something that, other than what you're doing with Riverstone, is pressure pumping something that, and…

The next question is from Waqar Syed at Goldman Sachs. Waqar Syed - Goldman Sachs & Co.: Thank you for taking my question. Tony, you mentioned that you're providing additional services on the drilling rigs. Could you describe what those are, number one? And number two, when do we start to see the impact of those services on the profitability of the Rig Services business? Anthony G. Petrello - Chairman, President & Chief Executive Officer: Okay. Well, they range from everything what you've heard about before, obviously one of the core ones is ROCKIT, which is the performance part that we use when you drill all these horizontal sections. There is only one competing product out there, and I think it's really a second-rate product and it (48:57) for the marketplace. We have another product called REVIT which is a stick slip mitigation, which has been extremely helpful and could account for the case study I just referred to a little bit. We're doing BOP testing, we're doing chokes. We've also started with some customers running casing running with a new casing running tool that we're testing. And so those are the kinds of things that we're talking about in addition to what we're replacing, which would be our directional tools, which by the way are not the conventional directional tools but these tools we are offering have add-on capabilities that are competitive with what the big boys use offshore. They do downhole torque, downhole weight on bit. They do azimuthal gamma, which is something that in the market it's not really interesting yet. We all saw the (49:47) module as well. So there is a lot of stuff in the pipeline. You're not seeing the numbers yet, but obviously we're building out the organization and that, coupled with the…

So what Tony is referring to, an Analyst Day, which is going to be held in November. Waqar Syed - Goldman Sachs & Co.: Sure, I already have you guys on the calendar, so looking forward to that.

Thank you. Waqar Syed - Goldman Sachs & Co.: Thank you, sir. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Thank you.

Your next question is from Marc Bianchi at Cowen. Marc Bianchi - Cowen & Co. LLC: Thank you. Maybe just a point of clarification for the international comments that you provided, and thanks for such detailed guidance. Is the sort of 4% to 5% margin decline, or I guess 3% to 4% EBITDA decline, and then another 5% in the fourth quarter, is that off the $150 million that you reported in the second quarter?

Yes. Marc Bianchi - Cowen & Co. LLC: It is? Okay.

Yes. Marc Bianchi - Cowen & Co. LLC: Okay, and then if I kind of carry that through I end up with something in the sort of mid-to-high $130s million by the fourth quarter. Just wondering if we excluded all of the recoveries that you're sort of chasing right now in terms of any kind of repayment that might be out there, where would that number be? Really what I'm trying to do here is get a base line for starting 2017 for your continuing business.

Well, so some of those recoveries, most of those recoveries that would be one time would be in the third quarter, I think. But some of those recoveries are recurring, right. Those are recoveries of pricing that we've given in the past and things of that nature. Marc Bianchi - Cowen & Co. LLC: Okay, so then something in the high $130s million is really what we would be expecting as you enter 2017.

Yes, yes. Marc Bianchi - Cowen & Co. LLC: Okay. And then, to the comment about the $75 million of kind of recurring business that you signed up here, how much of that is going into the international business as we enter 2017? Anthony G. Petrello - Chairman, President & Chief Executive Officer: I don't want to be break it down right now, because there are three notable contracts and it will become clear but right now I'd rather not... Marc Bianchi - Cowen & Co. LLC: Okay. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Because there's three high-profile contracts and you guys are smart enough and you are going to start to try and pick apart the actual contracts and who did what to whom. So we don't want that to happen. So to be honest with you we thought we – whether it's five years or at least five years, one is actually a little bit longer, or at least five years, and as I said the EBITDA is, between all three of them, is a minimum of $75 million. Marc Bianchi - Cowen & Co. LLC: Excellent. Okay. Thank you. I'll turn it back.

Maybe we've got about five minutes left. Let's just take one more call, please. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Yeah, just to be clear, so when I'm talking about these three contracts, I am talking about the M400 rig, the rig in Kazakhstan and the coil tubing rig in Alaska. All of which, obviously the Kazakhstan rig starts by the end of the fourth quarter, should be on payroll in the first quarter, the Alaska rig starts...

October 1 – late September. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Late September next year and in the press release we indicated when the M400, what the drop dead date is. So you know for sure when that thing gets on payroll, the M400. It depends on what Chevron is doing in terms of planning whether it can get out on the platform earlier.

Alaska this year. Anthony G. Petrello - Chairman, President & Chief Executive Officer: Alaska...

End of September. Anthony G. Petrello - Chairman, President & Chief Executive Officer: The end of September this year, I'm sorry. Yeah, I misspoke. So you've got two of the three go on, basically be up and running by the first quarter of 2017.

Amy, go ahead with the last question, please.

The last question is from Dan Boyd at BMO Capital Markets.

Hi, thanks for squeezing me. One of my questions is more of an accounting question, just on where are you going to recognize the services revenue above and beyond the daily rig rate? And then the other one is from a risk management perspective. Are you protected if there is downside related to say a lower fee service such as BOP testing?

So the accounting it will go into the Rig Services category. Anthony G. Petrello - Chairman, President & Chief Executive Officer: So it doesn't – we're not getting into the margin on the rigs currently, we're not doing that. We're keeping it as a separate infrastructure. So it's kind of a separate line as part of the Rig Services. That's the first thing. Then on the second thing, it depends on the type of service. I mean for example ROCKIT, REVit, the amount of downtime associated with that in terms of the – it's really nothing in terms of the rig. The BOP testing, there's not really a substantial risk. When people are drilling sometimes there is a linkage between your downtime on the rig versus your downtime when your – with the tools that you're using, and that's all part of where things are in the marketplace at a certain time. But we don't really see a huge risk increase, risk exposure from these particular services that we're talking about at all.

Okay. Great. Thank you.

Ladies and gentlemen, that will wrap up our call for today. And if we didn't get to your questions or you want to follow up with anything, just feel free to contact us either by phone with William or myself or by e-mail. Amy, if you want to go ahead and close up the call, please.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.